A lengthy inquiry into the often prickly relationship between Birmingham city council and its private sector ICT providers Capita has concluded that both sides must try harder to get along, reports Paul Dale.

Two scrutiny committees spent weeks interviewing council officials and managers from the Capita-led joint venture company Service Birmingham in what became the longest marriage guidance session ever.

Their report – Refreshing the Partnership – has been published and will be discussed at the June 9 full council meeting.

Broadly speaking, the scrutiny committees say the evidence they heard suggests the “historic mistrust that has grown up between the partners over the years will be a barrier to success unless it is explicitly addressed”.

The relationship with Capita, which began in 2006, has always been something of a red rag to Labour councillors who have accused Service Birmingham of profiteering at the expense of the public sector.

In the first six years of the contract Capita pocketed £1 billion for running the council’s ICT services and delivering the business transformation programme. It could be argued however that the savings generated through business transformation almost paid Capita’s wages.

Sir Albert Bore’s Labour administration which took over in 2012 succeeded in renegotiating the Service Birmingham contract with savings of £20 million a year and brought control of the council contact centre, a source of complaints, back in-house.

The scrutiny inquiry recalls that an independent studyof the council-Service Birmingham relationship in 2013 by the Best Practice Group found that with the business transformation project completed the “level of innovation seems to have stalled and the relationship has deteriorated”.

According to the inquiry’s final report, the biggest issue is to address the “historic mistrust” that has grown up between the city council and Service Birmingham over the years.

The document tackles head on the perception from public and the press that “Capita see the Service Birmingham joint venture as a means to make money” and adds that “trust and confidence must be built back into the relationship”.

The report reveals that when council investigators probed Service Birmingham’s methods they discovered that, far from profiteering, the joint venture company charged rates at or below market level costs, something that the scrutiny councillors pointed out “does not seem to have been heard in many parts of the city council”.

The scrutiny report notes:

There has clearly been a perception – from members, the public and the press – that Capita see the Service Birmingham joint venture as a means to make money.

At our evidence gathering session, the Service Birmingham representatives acknowledged this perception, and that Capita does share in the profits made by Service Birmingham (as does the city council). However they emphasised that Capita views its partnership with the city council as its highest profile and largest local government partnership in the UK and that the relationship is of enormous importance.

Equally, councillors and officers – and the public – need to recognise that the partnership is a commercial one, not a social enterprise, a public sector mutual, or a charity, and therefore making a return on investment is intrinsic to the partnership.

However, the report also warns: “The partnership also needs to demonstrate that excessive or unreasonable profits are not being generated.”

The report continues:

There has been a common perception that a contractual, financially-driven relationship does not deliver what both parties collectively need. There is willingness on both sides but that needs to be evidenced, not just through the day to day behaviours, but by delivering projects that are clearly the result of collaboration, not ‘one side doing it to the other’.

Greater transparency is key including greater involvement in third party procurement, as well as assurances on Service Birmingham costs and that the ICT solutions identified are appropriate.

The evidence received suggests that the historic mistrust that has grown up between the partners over the years will be a barrier to success unless it is explicitly addressed. The key to tackling this lies in clarity and transparency. This is partly about information and communication, but it is also about how the partners work together.

Specifically, the City Council needs to be assured that it does get value for money from Service Birmingham and that Service Birmingham proactively shares ideas and demonstrates in its work the need to ensure spending is driven by business needs.

Recommendations in the scrutiny report include re-writing the Service Birmingham mission statement to make it more relevant to the council’s financial challenges and to find ways of both sides working more closely together for the common good.

Service Birmingham management must be part of city council management structures with SB officers attending senior council management meetings, the report recommends.

This would then need to filter down so that Service Birmingham is seen as part of the City Council at all levels. This could be evidenced in a number of ways, including better (earlier) involvement of Service Birmingham in directorate plans, so that they can offer ICT solutions, and better (more) use of Service Birmingham / Capita expertise in developing new projects or improvements to service delivery. The aspiration that Service Birmingham acts as the City Council’s “IT department” should also be set out clearly and defined.